Recently, I’ve been paying a lot more attention to momentum (or flow) in my trading.
When I trade with momentum, I’m often able to hold my trades for much bigger risk/reward because the force of higher timeframes is with me.
How do we recognise momentum? Well, a clue are the impulses that price makes. Are they larger and faster than the moves in the opposite direction?
This EURUSD short taken on Tuesday for 134 pips was a perfect example of trading into the momentum. There had been a previous impulsive move down, and so I was looking for supply zone setups to go short.
A favourite setup of mine is the Bull Trap. Here we have a perfect example of the Bull trap, taking out stoplosses from those who went short too early at the first swing high near supply, and also causing great pain to breakout traders who bought the break of the blue line.
I was expecting a break of the daily/4 hour demand and swing low of the 23rd January. The reason being that price hadn’t bounced quickly, but just hung around that area for 3 days making deeper and deeper inroads into demand. You can imagine the daily stoplosses that were sitting underneath that swing low, hence I decided to hold for a break.
Price did break and made multi year lows that had not seen since the year 2003. I closed the trade at 8pm the following day after price went into consolidation.In hindsight I could have held the trade for longer and the momentum continued down the next day too.
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